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Fairer break fees

The problem:

Break fees are punitively high, and deliver a windfall to landlords.

The solution:

Set break fees at a reasonable amount.

Under some tenancy agreements, you may have to pay your landlord a ‘break fee’ if you end your tenancy before the end of the fixed term. New South Wales tenancy laws set the amount of the break fee at four weeks’ rent or, if you are leaving in the first half of the fixed term, six weeks’ rent. The break fee is payable even though your landlord might rent the premises out again immediately after you leave.

These amounts are so excessive and punitive that if our tenancy laws did not expressly provide for them, break fees would probably be illegal.

The current law also does not reflect the reality that where a tenancy is ended very early – in particular, before you even move in – the landlord may still have other interested applicants and no repair costs.

Break fees should be set at three weeks’ rent, which would provide reasonable compensation to landlords, without penalising tenants who have to move. Furthermore, where a tenancy is ended before the date the tenant is to occupy the premises, there should be no break fee or compensation payable.